If you have a lot of debt and you’re making a bunch of payments each month, you might be wondering, “Can I get all my debt into one payment plan?” The quick answer is it depends. There are certain types of debt you can consolidate and others you can’t.
What is Debt Consolidation?
Simply put, debt consolidation is combining all of your current debt such as credit cards, payday loans, and other installment loans into one payment.
This is done by obtaining a consolidation loan and then using it to pay off all your other debts. You still owe the money, but you now only owe money to one bank or loan company.
That means you will be making one payment per month instead of several payments. Typically, this will save you money and make it easier to pay off your debt.
Can I Get All My Debt Into One Payment – How to Consolidate Debt
Before you make the decision to get a loan to consolidate your debt, you will need to gather some information including the following:
- Make a list of all the debts you owe and want to consolidate.
- Total this amount to determine how big your loan will need to be.
- Make a list of all the minimum monthly payments on this debt that you currently pay.
- Total this amount to determine your total monthly payment.
- Take note of the interest rates you are paying on your debts as well
With these totals, you will have an idea of how much you owe and how much you can pay per month on a loan as well as the average interest rate you are currently paying.
This is important because you want to ensure that your total monthly payment and interest rates are lower than what you currently have.
The whole point of obtaining a debt consolidation loan is to save money and pay off debts faster, so if that isn’t going to be possible, then a debt consolidation loan isn’t a good option for you.
Can I Get All My Debt into One Payment – Can You Consolidate all Your Debt?
You can consolidate most debts but not all of them. The most common types of debt that you can consolidate include:
- Credit cards
- Payday loans
- Unsecured loans or debt
- Medical debt
- Past due bills such as utility bills
- Debts that are currently in collections
- Income tax or back taxes
Debt that is secured such as car loans and home mortgages are not typically added to a consolidation.
The main reason is that the interest rates you are paying on these types of debts are usually much lower than you would receive for a consolidation loan or what you are paying on credit cards.
While it is true that past due utility bills and medical debt do not have interest rates attached to them if they are substantial and you have additional debts it can be a good idea to consolidate them.
This is true of any taxes you owe as well.
If you are past due on your income taxes, getting them paid off with a consolidation loan is always a good option. The one institution you don’t want to ever own money to is the IRS.
Even if you aren’t behind in paying your taxes, but April 15th has rolled around and you owe taxes and don’t have the cash to pay for them, using a consolidation or personal to do so is a good idea.
There is a lot let pressure when it comes to paying off a personal loan than owing the federal government tax money.
How to Get All My Debt Into One Payment?
One of the best ways to get all your debt into one payment is to apply for a personal loan. Personal loans can be a good option for a few reasons:
- You only have one payment per month instead of several or more.
- Your interest rate is typically lower.
- Your monthly payment can be lower as well.
By applying for and obtaining a personal loan for debt consolidation, you can pay off all of your other credit cards, installment loans, payday loans, and more while saving money at the same time.
Debt Consolidation Companies
There are many places you can obtain a debt consolidation loan or a personal loan.
If you have a good relationship with your bank, you want to start there. They already know you and that might make it easier to get approved.
This is true of credit unions as well, so don’t be afraid to talk to yours if you bank at one.
If you feel your bank or credit union is not a good option for you, there are many online loan companies as well.
Some of the advantages of an online loan servicing company are that you can apply online and usually have an answer very quickly and oftentimes the same day or the next day. You can even get your money the same day in certain situations.
Also, some of these online loan service companies deal with many lenders. That means you apply once and they match you with the best lender for you and your personal situation.
That way you don’t have to apply to several banks or lenders. It is one and done and you have your loan.
There are also online loan companies that will give personal loans to folks that have bad credit. You can check out one here.
The Good and The Bad of Debt Consolidation
Keep in mind, just like with anything in life there is good and bad that comes with debt consolidation.
Some of the good include what I already mentioned, lower interest rates, a smaller monthly payment, and only one monthly payment.
Also, with a personal loan, your payment doesn’t change from month to month, so you always know what your payment is which isn’t always true with credit cards.
There are also things that aren’t as good when it comes to consolidation loans.
First, there can be upfront fees, so you will want to determine what they are if any.
Secondly, if you get a personal loan to pay off your credit cards, for example, and then continue using your credit cards, you will end up in a worse situation than when you started, so do be careful.
What is the Smartest Way to Consolidate Debt?
If you are planning on consolidating your debt, one of the smartest ways to do so is to pay additional money on your loan each month.
For example, if your payment is $300 a month, add $50 or $100 dollars to it. Get it paid off as quickly as possible.
Also, be sure not to continue using your credit cards.
Don’t cancel them as that can hurt your credit score, but don’t go on a shopping spree either.
Do Debt Consolidation Loans Hurt Your Credit?
In the long run, no, debt consolidation loans don’t hurt your credit score.
Having said that, when you apply for one, the loan company will do what is called a hard inquiry and that will lower your credit score a few points.
The good news is that your score will bounce back and as long as you make your monthly loan payments on time, having a personal loan might actually help your credit score in the long run.
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Debt Consolidation Calculator
If you want to do a quick calculation to determine how a debt consolidation loan might help you, you can find a good, free debt consolidation calculator here.
Can I get all my debt into one payment plan? Yes, you can, and a personal loan is a great way to do so.